15 February 2019

Why Hong Kong will never be just another Chinese city


The Heritage Foundation recently published its annual ranking of the Index of Economic Freedom, putting Hong Kong’s economy as the freest in the world for the fifteenth year in a row. In contrast, China occupies the 100th place out of 169 countries, below Russia and Namibia.

Hong Kong’s crucial role in China’s economic development since the 1970s is self-evident — the port city carried immense strategic significance since Deng Xiaoping initiated China’s ‘open door policy’ in 1978. It served as a gateway for China to the outside world, facilitating trade and the forming of economic relationships with many key exchange partners such as the US, Japan and Taiwan.

Hong Kong’s influence and strategic significance did not change much after the handover back to the PRC in 1997, as its role as a regional headquarter for business in China continued to grow. The preservation of Hong Kong’s free market economy after 1997 allowed it to become one of the fastest-growing economies in Asia and develop into a booming international financial centre, competing with London and New York. But if 22 years ago the cosmopolitan city was a prized possession for China, its overall importance to the country’s economy is now declining rapidly. Hong Kong’s significance to the Chinese economy has shrunk a great deal since the handover, falling from 18.4 per cent of the mainland’s economy in 1997 to less than 2.9 per cent in 2017.

Of course, China has seen its GDP soar in the past two decades and it is now an economic superpower. The establishment of Special Economic Zones to promote free trade in cities like Shenzhen, Guangzhou and Shanghai has allowed them to develop quickly and attract foreign direct investment. Shenzhen, located just across the border from the Special Administrative Region (SAR), has now taken the accolade of China’s most competitive city from Hong Kong, which has started to lag behind its mainland counterparts in innovation and technology.

Ruling in at first place for economic freedom has continued to delight Hong Kong government officials for a quarter of a century. The SAR is known for its well functioning economy with very little government interference, but a closer look suggests that it’s more restrained than one would hope to believe. A recent report found that the main threat to the Hong Kong economy was Beijing’s ongoing interference. Sky-high property prices also mean ordinary Hong Kongers do not all enjoy the lifestyle that its wealth might suggest.

Hong Kong’s position as a hyper-modern global city is slowly eroding, with research suggesting that it is now a city in decline. Nor is it necessarily ahead of the game when it comes to consumer technology: mobile payment systems and mobile ride-hailing app Didi Chuxing, which has effectively pushed Uber out of the Chinese market, have proved to be vastly more efficient in mainland China. The rise of a new class of Western-educated Chinese professionals also poses a threat to Hong Kong’s elite.

Although Hong Kong is meant to enjoy “a high degree of autonomy, except in foreign and defence affairs” for 50 years after the 1997 handover under the ‘one country two systems’ constitutional principle, the city’s independence is quickly diminishing. The aftermath of the 2014 pro-democracy protests led by Scholarism founder Joshua Wong, and the subsequent trial and sentencing of Wong and the rest of the ‘Umbrella 9’ for taking part in the demonstrations bode ill for the future of Hong Kong’s democracy. The abduction of booksellers in 2015 and the banning of the pro-independence Hong Kong National Party also show Xi Jinping’s intent to crack down on freedom of speech in the region.

But even if Hong Kong’s hopes for self-determination will seem like a distant fantasy in the years to come, the cultural uniqueness of the city’s inhabitants will prevail. Hong Kong’s history and culture make it special, and the people’s singular identity protects the island from becoming just another Chinese city.

For all that the Communist Party seeks to homogenise China, 156 years of colonial influence during Hong Kong’s formative years won’t be forgotten that easily – young Hong Kongers across the political spectrum have a well-developed appreciation for freedom and democracy which sets them apart from the 1.4 billion mainlanders living just across the Shenzhen border.

A public opinion poll carried out by the Hong Kong University (HKU) Public Opinion Programme in 2017 showed a growing number of people rejecting a Chinese identity in favour of a distinct Hong Kong identity. This is mostly among the younger generations: the proportion of 18 to 29 year-olds who describe their ethnic identity as broadly Chinese has dropped from 32 per cent after the handover in 1997 to just 3 per cent in 2017. Over that same time period, the proportion of the same age group describing themselves as a ‘Hong Konger’ has jumped from 68 per cent to 94 per cent.

Fear of increasing authoritarian control and the outcome of the Umbrella Movement is causing more and more despair for the city’s inhabitants and growing distrust for Beijing. Another HKU public opinion survey from last year showed that their distrust had reached the second-highest level in the first half of 2018 since the 1997 handover, the highest being during the Umbrella Movement.

The combination of anti-China sentiment and the social and cultural norms inculcated under British rule fuel the division between the Chinese and Hong Kong people, and are behind the pro-democracy movement. That resentment also manifests itself in growing disdain for Chinese immigrants and tourists, whom many people in Hong Kong see as invaders changing their city for the worse.

The inconvenient truth, however, is that despite desires for political independence, Hong Kong looks to the mainland for most of its resources. The city depends on China for basic necessities such as water, food and energy to provide for its seven million people. Some 80 to 70 per cent of Hong Kong’s water is imported from Guangdong, sourced from the Dongjiang river, over 90 per cent of fresh meat and vegetables consumed in Hong Kong comes from mainland China, and more than half of local electricity consumption is generated by mainland energy sources.

The city is grappling with numerous challenges, and is falling into political and economic malaise. But despite everything, Hong Kong remains a vital asset to the Chinese economy – it is still a key hub for investment in and out of China and facilitates access to global capital markets for bond and loan financing. What’s more, Hong Kong has a major role to play in China’s multi-billion dollar Belt and Road Initiative by facilitating exchanges with other countries.

Beijing will continue to exert its control over Hong Kong. But the city still remains an asset to China that will be difficult to replace. Beijing’s increasing influence weakens Hong Kong’s economic and political situation, but the Hong Kong identity will live on. China cannot make the Hong Kong people forget their democratic culture founded in their history. Their home will never become just another Chinese city.

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Lucy Cotillon is an intern at CapX.